The bill of lading as a document of title

• Pages: 255-280
• DOI: https://doi.org/10.1108/14770021111165526
• Date: 13 September 2011
• Published date: 13 September 2011
• Author: Torsten Schmitz
• Subject Matter: Economics

The bill of lading as

a document of title

Torsten Schmitz

German American Chamber of Commerce, Inc., New York, USA

Abstract

Purpose – This paper seeks to analyse the different characteristics a bill of lading holds as a

document of title, including the proprietary effects a transfer of goods in transit can have and the bill’s

use as a means of security as well as its limitations in mo6dern international commerce.

Design/methodology/approach – The paper examines the document’s nature and the evolution of

its traditional legal functions. The analysis includes, among other things, the implications different

types of bills have as an instrument in commercial trade. Special attention is given to the attributes

that are likely to limit the bill’s application in modern international trade, concerning both its scope

and value. Finally, the paper offers a set of conclusions and suggests reform measures.

Findings – The paper shows how technological innovations in recent years have resulted in the

emergence of new forms of transport documentation that might challenge the bill’s role in the future.

The paper provides a clear understanding of the problems associated with the bill’s current form and

outlines the main approaches proposed to meet its need for reform.

Practical implications – The paper offers a conceptual analysis of the bill’s weak points and

discusses how simplification and standardisation, a central registry system and electronic

transmission of information may be able to increase efficiency.

Originality/value – Critical assessment undertaken may pave the way for an open discussion on the

subject. Legal culture and mercantile customs should be taken into consideration if a successful and

sustainable reform is to be achieved.

Keywords Negotiability,Proprietary effects, Transfer ofownership, Central registry system,

Electronic transmission, Electronicdocument delivery, Transport industry

Paper type Research paper

I. Introduction

Since historic times, bills of lading have been the most important commercial documents

in international carriage of goods by sea and have played an unparalleled role in

facilitating the financing of international sales contracts (Bennet, 1914, p. 4; Proctor,

1997, p. 2). As bills of lading evolved, they began to include more inform ation in

order to continue to serve the procedural and practical needs of international trade

(Wheble, 1975). Documents which had previously served solely as a recitation of the

quantity of goods were modified to adhere reports of the good’s condition and became an

instrument of protection for ship owners who included exceptions to liability in case of

damage to cargo in their bills of lading (Williams, 1991, p. 557; Mitchelhill, 1982, p. 7;

Murray, 1983, p. 691). However, it is the bill of lading’s role as a do cument of title, which

enables it to play the central part it does in international trade (Kindred, 1988, p. 8).

Owing to the fact that the bill is a symbol of the goods and that its possession gives

the holder control over the goods during transit, it is able to fulfil a number of

important functions (Schmitthoff, 2007, p. 590)[1]. As a start, it allows the person in

the bill’s possession to claim delivery of the goods at the port of destination. Further,

it facilitates trade since it allows speculations on the market by selling the bill on while

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Bill of lading as

document of title

255

Journal of International Trade Law

and Policy

Vol. 10 No. 3, 2011

pp. 255-280

qEmerald Group Publishing Limited

1477-0024

DOI 10.1108/14770021111165526

the goods are still in transit (Debattista, 2009, p. 13). For instance, in the case of bulk

cargos of grain, ore, and coal, or in oil tanker trade, the cargo is often the subject of

repeated negotiations while in transit (Williams, 1991, p. 565). Besides, it is possible for

the contracting parties to use the bill’s strength as a security instrument to raise the

finance necessary to effect an international sale of goods (Wilson, 2004, pp. 143-7;

Ivamy, 1989, p. 72). In so doing, bills of lading have also been able to provide the basis

of the documentary letter of credit as a means of financing international sales contracts

(Proctor, 1997, p. 17).

In recent years,however, technological innovations, such as faster ships, containerised

processing andmultimodal transporters with integrated transportsystems have resulted

in the introduction of documentary standardisation (Giermann, 2004, p. 1). Though bills

of lading are still widely used inany trade that may require the sale of goods during the

voyage, such as commodity trades,new forms of transport documents have emerged as

result of these developments in the transport industry, particularly to circumvent the

problem of the late arrivalof documents at the port of destination usually associatedwith

the use of the bill of lading (Proctor, 1997, p. 17). However, the bill’s unique feature as

documentof title, which made its application fundamental in internationaltrade, may also

limit its usefulness in the future (Lloyd, 1989, p. 49).

Section II of this paper closely outlines and examines the characteristics a bill of

lading holds as a document of title. In Section III, special attention is given to the

proprietary effects a transfer of the goods in transit can have as well as the bill’s use as

a means of security. Section IV then addresses the document’s attributes that are likely

to limit its application in modern international commerce in the future, concerning both

its scope and value.

II. Characteristics of a bill of lading as a document of title

The bill of lading is a commercial document with a long history. The purpose of this

section is to provide some general background of the document’s nature. Generally, a bill

of lading is a document signed and issued by or on behalf of a carrier of goods by sea to

the person – usually known as the shipper – with whom he ha s contracted for the

carriage of the goods (Treitel, 2006, p. 1132). The bill of lading acknowledges the receipt

of goods by the carrier in the condition stated and sets out the terms under which the

goods are carried (Mo, 2003, p. 236). In so doing, it also evidences the existence of a

contract of carriage, which – in the simplest case – will be concluded between the

owner of the ship on which the respective goods are carried and the person who

has delivered them to the ship owner for the purpose of carriage. In reality, however,

the circumstances are often more complicated. For instance, difficulties may arise in

identifying the parties, where goods are carried in a chartered ship since the carrier may

be either the ship owner or the charterer. Also, the person who shipped the goods may

have done so as agent of another person. In addition, the bill of lading commonly

provides for the goods to be delivered to a person other than the shipper (Treitel, 2006,

p. 1133). Further, a bill of lading can qualify as a document of title, which then may

confer on the holder control of the cargo.

A. Lack of a uniformly accepted definition

The bill’s three traditional legal functions are also evident in the definition given in the

Hamburg Rules, a set of rules governing the international shipment of goods,

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